August 16, CBNA Commercial Banking SBA Loan Programs

CBNA Commercial Banking

SBA Loan Programs

August 16, 2011

Table of Contents

Topics Pages

What is the SBA? 2

Program Benefits 3-4

SBA 7A Loan 5-7

SBA 504 8-11

Application Requirements 12

SBA Loan Process 13

Q & A 14

Exhibits 15-18

• The Small Business Administration (SBA) was established in 1953 as

an agency of the Federal Government

• SBA was created to aid & protect the interests of small business owners

• SBA provides loan guarantees to give small business greater access to

long term capital

• SBA partners with banks /lending institutions to deliver loan programs

What is the SBA?

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SBA Program Benefits - Client

Why is it good for the Client?

• Long term financing

• Lower down payment

• Lower Collateral requirements

SBA Program Benefits - Lenders

Why is it good for the Bank?

• Government guaranteed-75% (SBA 7A loan)

• Lower Risk Exposure – improved LTV (SBA 504)

• Profitability

• Excellent Cross Sell Opportunities

• Bank does not have to reserve for guaranty portion of loan.

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SBA 7(a) – Loan Purpose

Loan purpose

• Expand or acquire a business

• Purchase or construct real estate to be used by the business

• Refinance debt – (SBA conditions apply)

• Buy equipment

• Provide working capital

• Construct leasehold improvements

• Inventory

SBA 7(a) – Loan Size and Amortization

Project Size

• $250M to $5MM

• SBA guarantees a portion ( up to 75% )

Amortization

• 25 years for real estate

• 10 years for equipment, & business acquisition

• 7 to 10 years for working capital

• All loans are fully amortized

• No balloon payments

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SBA 7(a) – Rates and Fees

Rates

• Variable Rate Loan

• Packaging Fee of $1,000

SBA guaranty Fee

• Up to $150M --- 2% of guaranteed portion of loan amount

• $150,001 to $700M --- 3% of guaranteed portion of loan amount

• $700,001 + --- 3.50% of guaranteed portion of loan amount

(*) Additional .25% on guaranteed portion above $1MM. Guaranty Fee on $2MM loan would be $53,750.

SBA 504 – Loan Purpose

Used primarily to purchase, construct, or expand a real estate

facility (with 51% occupancy), such as:

•

• Industrial building

• Industrial warehouse

• Industrial manufacturing facilities

• Retail building

• May also be used to finance long term equipment

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SBA 504 – Loan Project Size, Amortization, and Structure

Project Size

• $500,000 to $20,000,000

• Combination program with bank loan & SBA debenture

Features

• Up to 25 years fully amortized

• Fixed Rates

• No balloon payments

Structure

• 50% - Non-SBA bank loan in 1^st lien position

• 40% - SBA direct loan ( handled by a CDC) in 2^nd lien position

• 10% - Cash down payment from borrower

SBA 504 – Loan Rates and Fees

Rates

Required to meet RORC and Minimum Pricing Hurdles

Citibank Fees

• 1.0% Citibank fee on 1^st mortgage amount.

• .25% Citibank fee on Bridge Loan

• Approximately 1% on Construction Loan Fees, if applicable

SBA/CDC Fees

Approximately .65% of the debenture amount

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Benefits of the SBA 504 Program

• Lender Holds First Lien Position

• CDC processes all SBA paperwork

• Improved LTV ratio reduces risk to lender

• Lender sets interest rate and fees on 1st mortgage

• Minimum 10% down payment

Application Requirements

• Completed SBA business loan application

• Personal financial statement of all owners/principal with 20% share

• 3 years tax returns for business and personal

• Interim business financial statements

• Business entity documentation

• Purchase agreement (if applicable)

• Copy of bank statement to document availability of owner’s injection

Page 12

SBA Loan Process

SBA Director works directly with the CDC/SBA to:

• Determine SBA Eligibility

• Determine Creditworthiness of the Customer

• Make sure the loan conforms to Citibank RACs

Upon acceptance of the initial review, the SBA Director will

coordinate with the RM/BDO, the CDC and the Citibank Credit

Center through the collection of a complete loan package, approval

and funding process.

Q&A

Page 14

EXHIBITS

Exhibit A – Who is eligible for SBA loans

7a

• Most for profit small businesses

• Most Retail and Service industries identified by NAICS code with gross sales less than $6.5MM

• Manufacturers with less than 500 employees

• Wholesalers with less than 100 employees

504

• Same as 7a or alternative standard of Net Worth < $15MM or Net Profit < $5MM

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Exhibit B – Who is NOT Eligible for SBA loans?

Companies that are not eligible for SBA 504 and 7a loans are:

• Not-for-profit businesses

• Businesses engaged in lending

• Passive holders of real estate and/or personal property

• Life insurance companies

• Businesses located in a foreign country or owned by aliens

• Businesses selling through a pyramid plan

• Illegal businesses

• Businesses which restrict patronage

• Government owned entities (excluding Native American Tribes);

• Businesses engaged in promoting religion

• Consumer and marketing cooperatives

• Businesses engaged in loan packaging

• Businesses owned by persons of poor character; equity interest by lender, CDC or associates in applicant concern

• Businesses providing prurient sexual material

• Businesses that have previously defaulted on a Federal loan

Contact Information

Alex Fouquet, Business Relationship Manager

Phone No: (954) 621-8649 E-mail : [email protected]

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